Out of the Great Recession? Fed Rate at Zero?

[olderstill]

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Message #1 - 12/23/10 11:12 AM
See more survey results

The Fed cut the fed funds rate to near 0% for the first time in its history in December 2008 in response to the economic meltdown. Since lowering rates is the typical tool the central bank uses to spur economic growth, it has had to find other means to encourage growth since then.

In November of this year, the Fed announced a plan to buy $600 billion more in long-term Treasuries to try and spur growth. The move prompted widespread attacks from critics who believe the Fed risks devaluing the dollar, prompting a return of high inflation and creating asset bubbles.

0:00 /4:42Pimco CEO doubts Fed's latest move

But the survey showed disagreement among the economists, with 12 out of 25 expecting no significant economic impact from the Fed's controversial policy.

Another 11 believed the policy would boost growth, although two of those said it would be at the price of high inflation.

But even some of those who expect the Fed's policy to work still have their doubts about the move.

"Growth ... is likely to be later than we hope -- in the second half of 2011 and into 2012," said David Berson of PMI Group. "Unfortunately, we won't need the boost then."

Almost all the economists think the Fed's current plan will run its course, as 22 of the 25 expect the central bank to purchase the full $600 billion in Treasuries. Just two economists surveyed predict that the Fed will pull the plug early, although a third believes that it should.

And despite some ambiguous comments from Fed Chairman Ben Bernanke on 60 Minutes earlier this month, the economists don't expect another round of purchases after this one, with only one predicting that outcome.

[olderstill]

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Message #2 - 12/23/10 11:21 AM
Basically folks the economy is getting into even worse trouble now and Bernanke is having to buy US T-bills by the billions even trillions as no one else is buying them.

If you think that this trend is going to stop then you are sadly mistaken.

Unemployment is still at 20 percent and going to grow.

We are getting an ever lower and lower medium wage while the average wage keeps increasing.

This means that more and more Wall Street bankers are making $250,000,000 a year plus and fewer and fewer people are making more than minimum wage.

This is not very good news for the future of America.

We are still in a Death Spiral of lost jobs and an ever weaker and weaker economy.

The situation is so bad now that in the top 1 percent of wages earners there are a few people who are making more than the lower 120,000,000 people combined.

If you thought the housing market was going to collapse when medium wage was $32,000 a year wait until the end of next year when the medium wage is $24,000 a year and houses are stilling trying to be sold for $300,000.

Look folks prices and wages are totally out of wack with reality. Real GDP is still dropping like a rock when you back out the $2 trillion dollars the Federal Reserve and the $1.8 trillion dollars the US government have pumped into the economy.

Sure the super rich are now buying things again but that does not help the lower class and poor class of workers.

Perhaps that is why the US government is turning a blind eye to illegal imigration as those people think $5,000 a year is lots of money.

[olderstill]

PoorandUgly
Message #3 - 12/23/10 11:51 AM
We are getting an ever lower and lower medium wage while the average wage keeps increasing.
This means that more and more Wall Street bankers are making $250,000,000 a year plus and fewer and fewer people are making more than minimum wage.


Just so you know, you should continue to share these cathartic thoughts of yours on notmsnmoney.proboards.com.

[olderstill]

BGA4444
Message #4 - 12/23/10 01:38 PM

Just, I agree with everything you are saying. The fourth quarter sales for us are going to be off 30% vs. a terrible 4th quarter last year. You just can not keep having double digit declines for years and have a company left. This economy is in shreds. The big problem like you say is wages. In 1982 the bottom 80% of wage earners fought over about 48% of the income pie. In 2006 after over two decades of falling trends the bottom 80% fought over 38% of the income pie. What do you think that % is now below 30% of the pie? No wonder this economy is tanking!

[olderstill]

PoorandUgly
Message #5 - 12/23/10 01:55 PM
The big problem like you say is wages. In 1982 the bottom 80% of wage earners fought over about 48% of the income pie. In 2006 after over two decades of falling trends the bottom 80% fought over 38% of the income pie. What do you think that % is now below 30% of the pie? No wonder this economy is tanking!


Uh oh. You better be careful there BGA4444! You will wind up being accused (wrongly and hypocritically so of course, what else is new lol?) of class warfare by the fascists and banker friends in Washington.

But I salute you soldier. Carry on.

[olderstill]

ThinkThenAct
Message #6 - 12/23/10 02:32 PM
I am guessing you guys didn't do any holiday shopping because that tells a different picture.

[olderstill]

PoorandUgly
Message #7 - 12/23/10 02:57 PM
I am guessing you guys didn't do any holiday shopping because that tells a different picture.
No I did but good guess. But many did NOT because they have NO disposable income from NO job to spend on holiday shopping in first place. Forget even low wages. Many in fact have 0 wages earned this year.

[olderstill]

decoy409
Message #8 - 12/23/10 03:09 PM
The big problem like you say is wages.
Oh my, the latest from silverbearcafe 'is' talking as well.
No I did but good guess. But many did NOT because they have NO disposable income from NO job to spend on holiday shopping in first place. Forget even low wages. Many in fact have 0 wages earned this year.
Would this have to do with 60 MILLION U.S. WORKERS NO LONGER BEING COUNTED, but the ones on UNEMPLOYMENT still are counted until you simply become gunk build up in the great machine.
Only one way to deal with nasty build up of gunk when it tolls on the machine. You simply bring the jobs back to america and tell the rest sorry, it was a bad idea to ship them out in the first place.
Or do you just subdue them with the old rubber bullets like Miami days?

One thing is for sure! The problem will have to be addressed and the later is all but past with the sooner coming down the street.

[olderstill]

ThinkThenAct
Message #9 - 12/23/10 04:38 PM

Well, the point was that if you did some holiday shopping, you would have noticed there are a lot more people out this year than last year.

[olderstill]

decoy409
Message #10 - 12/23/10 04:55 PM
ThinkThenAct, the point is and will remain, depending on your neck of the woods and what you see, well certainly don't assume that it is the same all over. So your statement above,
Well, the point was that if you did some holiday shopping, you would have noticed there are a lot more people out this year than last year.
may be a correct assumption for your neck of the woods, but others see things differently from theirs.
All one needs to do is to go to the busy corner with tablet and pen and start asking the folks. I imagine if you did that, why your own words of yours would seem a bit silly.
No foul, just stating.

Oh one other thing,

Wishing You and Yours ThinkThenAct, A Very Merry, Safe and Warm Holiday Season!!!

[olderstill]

ThinkThenAct
Message #11 - 12/23/10 05:53 PM

Thanks, the same to you, sir!

[olderstill]

BiMetalAUPT
Message #12 - 12/23/10 06:29 PM

Just....;

to be very much in the 1931 crash of the European Banking system starting with the Austrian Bank implosion..!!! this is real bad... Germany has repeated its stance on the buying of Sovereign Bonds by the UCB.. Axel Weber want no part of it.. etc..

Now for the interest rates.. A: confusion about the zero to 0.25% overnight interbank rate target.. This is a target.. Last year the effective rate was about 0.08% now it is about 0.20%.. so in fact interest is going up,

B:Also the discount window was 0.25% with a 30 days now it is 0.5% overnight rate only.. So interest has in fact gone up in the real world of Banking.
C: CD were sold for about 0.35% last week to banks on a bid system.

Now you see the game Ben B. is playing.. a lot of confusion.. Hope I got it right if not Flow5 will send in a correction..

Just a thought,
Bi Metal Au Pt

[olderstill]

dendl
Message #13 - 12/23/10 07:14 PM

Hey Bloggers,

After reading your opinions, there's a clear conclusion. Bernanke is really fighting deflation. And guess what?

Bernanke will lose!

Chad in CO

[olderstill]

GreatDepression
Message #14 - 12/23/10 11:33 PM
What are we up to bernake,27 trillion dollars yet in your shoring up of the DOW markets........

If the fed quits,everything goes to the bottom and what theyve created is as plastic as the dollars they keep printing!

[olderstill]

Falling Sky - Not
Message #15 - 12/24/10 12:12 PM

To All Holdouts - Merry Christmas! Yes, We have about 600 people signed up on the new board and it is going strong! It would be a shame if the rest of you holdouts didn't join in!
There's lots of new abilities for posting and it's not a corporate board so the rules are not as strict, we actually have about as close to Freedom of Speech as you are going to get now days! Virgil has a bot that will copy all your posts from this to the new board for you if you desire.

Please do join us - All are welcome - notmsnmoney.proboards.com/index.cgi

[vl]

Do you get the feeling that NO ONE in Washington actually knows anything but NO ONE is willing to say so?
BANKS want to bring back warehousing for the GSEs. In the open market, warehousing is a great filter for catching fraud and holding investors to commitments. In Agency-grade credit, it's just another HEDGE exposing us to more potential derivatives, bubbles and volatility.

Where is the COMMON SENSE?

[olderstill]

V_L, they will not give up. They smell money somewhere and want it out in a big pile, within easy reach.

It's been said before, they are ruining their own game. If it continues of course, money will become relatively valueless, and they'll have to start another game to amplify their returns. By that time, of course, no one in the levels beneath them, owners of that which they anticipate will be the source of their ever growing hoard, will have anything of value worth scheming for.

[bimetalaupt]

V.L.,
If my math is correct then more money went to European banks to keep the Banking/Sovereign bond carry system going to fund the European Social Retirement systems then to the American Banks.. Got a life line but the cost was high for the EU. Many of the European debt is greater then their GDP!!..

Most of the reports let your mind think we saved Wall Street.. No Wall Street made the Federal Reserve a lot of money.. They did not lose a single dime.

So why are banks not lending.. Credit Unions have been.

Bi metal Au Pt

[comokate]

"Many U.S. Companies are Hiring...Overseas"

www.msnbc.msn.com/id/40827123/ns/business-us_business

It is *impossible* for the largest sectors of the American population to feel or achieve any sort of financial "recovery" when joblessness increases !

[comokate]

"Wall Street" is filled with companies that have multinational ownership and investment. What is best for the interests of "Wall Street" is not necessarily best for the interests of "Main Street, USA".

[verrip1]

Now, Frank. It makes people feel all warm and fuzzy when they can split the world into bad guys and good guys.

Where would this here Unitey States of Murrica be without a good old dose of class warfare?

[bimetalaupt]

Jan 9, 2011 16:29:08 GMT -5 @comokate said:

"Wall Street" is filled with companies that have multinational ownership and investment. What is best for the interests of "Wall Street" is not necessarily best for the interests of "Main Street, USA".

KATE,
Yes, BUT the main street is the power that makes all the international banks in the USA able to lend money to the world at a higher interest rates. The Citibank and Bank of American office in Abilene,TX have accounts that only take deposits and the bank lends money is large chunks to developing nations like India at a real good rate. That is where they make all that money they used to make. The game changed when AIG went insolvent. It is all about Counter party risk and large deals.

Just a thought,
Bi Metal Au Pt

[bimetalaupt]

Jan 13, 2011 22:31:54 GMT -5 @franktheimpaler said:

Bruce AIG's offering will be the largest in the history of the US stock markets...how does that reconcile?

Frank,
Any way you look at it AIG got a better deal the FGIT.. I am not aware how much this will help with the understanding of counter-party risk.. The risk is their esp in the European Banking system.. The Netherlands banks will not trust the USA insuring firms and German banks will not trust any bank. The Swiss Banks are not trusting the German banks. Ben B. took on more risk they we know but he was banking on the backing of the Federal Governments Treasury of Germany, Netherlands and France. It is a mess. Will it work. Yes, In Ben B.'s Dreams. My night dreams are about as good as our domestic savings rate.
I still hold they could have saved Lehman but memories on Wall Street of Long Term Credit go deep.
Just a thought,[/img]
Bruce...
A revised bailout of American International Group Inc (AIG.N) may be just another "band-aid" solution, but more than five months after it was first rescued by the government the option of letting the insurer fail would still be considered too big a shock to already fragile global markets.

AIG's board on Sunday approved a broad revision of the U.S. government's $150 billion rescue. It was the third time the government has reached out to the struggling insurer and the latest rescue is expected to put greater funds at AIG's disposal to keep it afloat as it readies to report a roughly $60 billion loss early on Monday.

While putting more taxpayer money at risk is unlikely to be palatable in the current economic environment, analysts said the U.S. government had little choice. Without government intervention, AIG's expected losses would prompt credit ratings downgrades -- triggering even more debilitating losses for the insurer, and its trading partners.

"The government really does not have the option of letting AIG totally blow up," said Robert Haines, senior insurance analyst at CreditSights,

AIG's foray into the roughly $28.5 trillion credit default swap market left it heavily exposed to losses on toxic mortgage assets that it had guaranteed against default.

AIG, through a financial products unit, sold more than $450 billion of protection on securities to U.S. and European banks. With government support, some of those derivatives have been unwound, but the company still has about $300 billion of this exposure, according to Credit Sights.

Haines said that European banks in particular, counterparties on many of AIG's outstanding derivative contracts, "would be hammered if the U.S. walked away."

Donn Vickrey, an analyst with Gradient Analytics, who has closely followed the financial deterioration at AIG said while "European banks are about two-third of the problem ... it would be a domino effect across the globe.

"The ensuing panic would be disastrous," he said.

AIG was saved from bankruptcy last September, just days after the collapse of investment bank Lehman Brothers, with $85 billion in taxpayer funds that later swelled to $150 billion. The company has tried to plug its deepening financial problems by raising funds through asset sales but has found few buyers in the current environment.

Lehman's collapse caused significant losses for banks worldwide. Many more could suffer if AIG failed, as it would leave trading partners -- banks around the world -- to absorb giant losses, something their already weakened balance sheets can ill afford.

"It would surely have had a bigger impact if AIG had failed at the same time as Lehman" last September, said Suki Mann, credit strategist at Societe Generale in London.

But even now, in AIG's weakened state, "they simply can't be allowed to fail. There would be more unwinds on trades and obviously markets are very fragile," Mann added.

Moody's Investors Service and Standard & Poor's both have AIG on review for downgrade from the seventh highest investment grade, and have said that only government support was keeping ratings from being cut to "junk" status.

"If AIG is allowed to fail -- many banks holding CDS paper from AIG could also fail," said Mark Keenan, insurance partner at law firm Anderson Kill & Olick. "In other words, I don't think the U.S. government can afford to allow AIG to fail -- no matter how many bandaids may be needed," he added.

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